A 13-week cash flow forecast is a crucial tool that can help you forecast your cash available to meet operating expenses.
Timing differences from your net income from your profit and loss statement to the cash in your bank include the following:
- Revenue recognized in Quickbooks vs cash received due to timing of the collection of accounts receivable.
- Prepaid expenses – upfront cash outlays for insurance, rent, advances to suppliers, etc. while GAAP or accrual basis accounting recognizes the expenses over the respective term or when incurred.
- Capital expenditures – Upfront cash outlays for equipment while the expense is recognized ratably over the estimated life of the fixed asset.
Advantages of Utilizing the 13-week cash flow model:
- Flexible and Forward Looking – The 13-week horizon is long enough to provide meaningful forward visibility but short enough to adjust the model as your business adapts to changing circumstances.
- Spend Management – By assessing your cash inflows and outflows week by week, startups and growing businesses gain a clear, actionable view of their cash position, enabling better operational control and expense / spend management.
- Proactive liquidity & risk assessment – The model helps identify potential cash shortfalls or liquidity risks well in advance, giving startups time to take corrective action—such as needing to draw down on a line of credit, raise funds from venture capital firms, managing expenses, or assessing receivables and identifying slow paying customers.
- Transparency with investors and banks – The model serves as a transparent, data-driven tool for communicating financial health, liquidity, and assessing working capital needs which builds trust with your investors and lenders. Positive cash flow and working capital are important metrics for lenders and investors and as such, preparing for any compliance and reporting requirements with detailed cash flow forecasts and updates on any changes to the model is important will enable positive relationships with your stakeholders.
Accounting Advisory Tip – Diversify Funding – Concentrations in a single funding source increases vulnerability! Establishing multiple financing sources from venture capital, credit lines, and traditional bank loans, startups and small businesses reduce dependency and improve resilience against unforeseen circumstances such as rising interest rates, or tightening of credit standards. Additionally, monitoring useful KPI’s such as AR turnover, DSO (days sales outstanding), and Inventory Turnover to ensure you are getting the best utilization of assets to generate cash flow.
Conclusion: In summary, a 13-week cash flow model is a valuable tool that helps startups and small businesses in Brooklyn, Queens, Bronx, and NYC manage cash proactively, make informed decisions, and build credibility with key stakeholders. Let Tekio Advisors LLC focus on your small business accounting services and Cash Flow Forecasting with our Fractional CFO Services – Whether you prefer to utilize Excel or Forecasting software such as Dryrun or Helm.